Investment Securities Available-for-Sale

9 Months Ended

Sep. 30, 2021

Investments, Debt and Equity Securities [Abstract]

Investment Securities Available-for-Sale

Amortized cost and estimated fair value of securities available-for-sale are summarized as follows:


			Gross		Gross		Allowance		Estimated
September 30, 2021	Amortized		Unrealized		Unrealized		for Credit		Fair
(dollars in thousands)	Cost		Gains		Losses		Losses		Value
U.S. treasuries	$	24,838	$	16	$	—	$	—	$	24,854
U.S. agency securities	356,626		806		(3,726)		—		353,706
Residential mortgage backed securities	1,206,867		8,151		(11,882)		—		1,203,136
Municipal bonds	119,511		4,284		(629)		(2)		123,164
Corporate bonds	81,376		783		(304)		(254)		81,601
Other	$	198	—		—		—		198
	$	1,789,416	$	14,040	$	(16,541)	$	(256)	$	1,786,659


			Gross		Gross				Estimated
December 31, 2020	Amortized		Unrealized		Unrealized		Allowance for		Fair
(dollars in thousands)	Cost		Gains		Losses		Credit Losses		Value
U.S. agency securities	$	181,087	$	1,461	$	(627)	$	—	$	181,921
Residential mortgage backed securities	811,328		14,506		(833)		—		825,001
Municipal bonds	102,259		5,872		—		(18)		108,113
Corporate bonds	34,383		1,624		(8)		(149)		35,850
Other	$	198	—		—		—		198
	$	1,129,255	$	23,463	$	(1,468)	$	(167)	$	1,151,083

In addition, at September 30, 2021 and December 31, 2020 the Company held $34.1 million and $40.1 million, respectively, in equity securities in a combination of FRB and FHLB stocks, which are required to be held for regulatory purposes and which are not marketable, and therefore are carried at cost.

Accrued interest on available-for-sale securities totaled $4.5 million and $3.5 million at September 30, 2021 and December 31, 2020, respectively, and was included in other assets in the Consolidated Balance Sheets.

Gross unrealized losses and fair value of available-for-sale securities for which an allowance for credit losses has not been recorded, by length of time that individual securities have been in a continuous unrealized loss position are as follows:


		Less than				12 Months
		12 Months				or Greater				Total
		Estimated				Estimated				Estimated
September 30, 2021	Number of	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(dollars in thousands)	Securities	Value		Losses		Value		Losses		Value		Losses
U. S. agency securities	45	$	200,153	$	3,135	$	47,078	$	591	$	247,231	$	3,726
Residential mortgage backed securities	109	769,073		10,332		48,869		1,550		817,942		11,882
Corporate bonds	6	26,699		304		—		—		26,699		304
Municipal bonds	11	38,213		629		—		—		38,213		629
	171	$	1,034,138	$	14,400	$	95,947	$	2,141	$	1,130,085	$	16,541


		Less than				12 Months
		12 Months				or Greater				Total
		Estimated				Estimated				Estimated
December 31, 2020	Number of	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(dollars in thousands)	Securities	Value		Losses		Value		Losses		Value		Losses
U. S. agency securities	28	$	46,412	$	67	$	41,320	$	560	$	87,732	$	627
Residential mortgage backed securities	35	170,178		782		6,419		51		176,597		833
Corporate bonds	3	5,764		8		—		—		5,764		8
	66	$	222,354	$	857	$	47,739	$	611	$	270,093	$	1,468

The majority of the AFS debt securities in an unrealized loss position as of September 30, 2021, consisted of debt securities issued by U.S. government agencies or U.S. government-sponsored enterprises. These securities carry the explicit and/or implicit guarantee of the U.S. government, are widely recognized as “risk free,” and have a long history of zero credit loss.

As of September 30, 2021, total gross unrealized losses were primarily attributable to changes in interest rates, relative to when the investment securities were purchased, and not due to the credit quality of the investment securities. However, as of September 30, 2021, the Company determined that part of the unrealized loss positions in AFS corporate and municipal securities could be the result of credit losses, and therefore, an allowance for credit losses of $256 thousand was recorded. The weighted average duration of debt securities, which comprise 99.9% of total investment securities, is 4.8 years. If quoted prices are not available, fair value is measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security's credit rating, prepayment assumptions and other factors such as credit loss assumptions. The Company does not intend to sell the investments and it is more likely than not that the Company will not have to sell the securities before recovery of its amortized cost basis, which may be at maturity.

The amortized cost and estimated fair value of investments available-for-sale at September 30, 2021 and December 31, 2020 by contractual maturity are shown in the table below. Contractual maturities for residential mortgage backed securities (“MBS”) are not shown as they may differ significantly from expected maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.


	September 30, 2021				December 31, 2020
	Amortized		Estimated		Amortized		Estimated
(dollars in thousands)	Cost		Fair Value		Cost		Fair Value
U.S. treasuries
After one year through five years	$	24,838	$	24,854	$	—	$	—
U. S. agency securities maturing:
One year or less	182,385		180,838		53,916		53,906
After one year through five years	97,969		98,179		110,083		110,777
Five years through ten years	76,272		74,689		17,087		17,240
Residential mortgage backed securities	1,206,867		1,203,136		811,328		825,001
Municipal bonds maturing:
One year or less	3,909		3,962		4,329		4,348
After one year through five years	24,618		26,133		26,622		28,272
Five years through ten years	70,937		73,293		69,309		73,389
After ten years	20,047		19,778		2,000		2,121
Corporate bonds maturing:
One year or less	13,928		14,148		5,218		5,220
After one year through five years	38,111		38,384		22,189		23,267
Five years through ten years	29,337		29,323		6,976		7,511
After ten years	—		—		—		—
Other	198		198		198		198
Allowance for Credit Losses	—		(256)		—		(167)
	$	1,789,416	$	1,786,659	$	1,129,255	$	1,151,083

For the nine months ended September 30, 2021, gross realized gains on sales of investments securities were $2.1 million and there were $47 thousand gross realized losses on sales of investment securities. For the nine months ended September 30, 2020, gross realized gains on sales of investments securities were $1.7 million, and there were no gross realized losses on sales of investment securities.

Proceeds from sales and calls of investment securities for the nine months ended September 30, 2021 were $164.6 million compared to $130.3 million for the same period in 2020.

The carrying value of securities pledged as collateral for certain government deposits, securities sold under agreements to repurchase, and certain lines of credit with correspondent banks at September 30, 2021 and December 31, 2020 was $240.2 million and $268.4 million, respectively, which is well in excess of required amounts in order to operationally provide significant reserve amounts for new business. As of September 30, 2021 and December 31, 2020, there were no holdings of securities of any one issuer, other than the U.S. Government and U.S. agency securities, which exceeded ten percent of shareholders’ equity.